TEP Capital to build portfolio of six Polish investments

Following the acquisition of Polish plastic film packaging maker Nicator – the sponsor's first since launching in January 2020 – it is hoping to close at least one more deal this year, Wozniak said. He emphasised that the firm is not under pressure to buy and is a disciplined investor.

TEP will focus on the manufacturing sector but will have a flexible approach to industries, looking at companies ranging from healthcare to business services providers. The preference is for well-organised, stable companies that could be scaled up under private equity ownership, Wozniak said, highlighting succession cases as an important area of interest.

The firm sources target leads from advisory firms, as well as from non-M&A sector experts and advisers, and from its own network of business contacts, Wozniak said.

Potential targets are likely to generate EBITDA of PLN 10-20m (€2.2-4.4m), but smaller companies with a strong business case will also be considered, Wozniak said. TEP is using bank leverage and could also, opportunistically, look at larger investments, to be made with the backing of its anchor investor.

TEP's funding has been provided by Thomas Gruppe, a German building materials conglomerate, and its owners, namely Eckhardt Thomas and the Thomas family. The sponsor does not disclose the maximum amount it could spend overall or individual deals, Wozniak said.

There are no immediate plans to expand TEP's investor base, Wozniak said, adding that despite the firm's reliance on a single investor, its structure and operations resemble that of a traditional private equity firm, rather than of a family office.

While the firm has analysed one project from the Baltic states in 2020, it is very likely that its portfolio targets will all be located in Poland, Wozniak said. This does not, however, extend to add-on acquisitions, which may well be made across Europe if they fit portfolio companies, he said.

TEP will be looking to divest assets in a five-year timeframe, likely via trade or secondary sale, Wozniak said.

Bolt-ons on the cards
The fund is planning to scale up Nicator's operations organically, with a focus on expanding relations with current clients, Wozniak said. However, he noted that the producer of polyethylene film – which records revenues of PLN 90m – operates in a highly fragmented market with numerous smaller players, so add-on deals are not excluded altogether.

For future platform investments, bolt-on deals will certainly be an option, Wozniak said, noting that Thomas Gruppe itself was built through market consolidation and thus "add-ons are close to our heart".

This article was originally published on Unquote sister publication Mergermarket

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